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Landlords who have disposed of property last tax year and have sold, or intend to sell another this year, have been warned of a tax reporting problem.
There is a requirement to report and pay capital gains tax on UK residential property within 30 days of completion. But there have been problems with the reporting system since its introduction last April, the Institute of Chartered Accountants in England and Wales has warned.
Now things have come to a head with taxpayers, such as landlords, who have CGT liabilities arising from the sale of properties this year and last needing to complete paper returns to avoid incorrect tax calculations.
Apparently the HMRC’s online systems are unlikely to come up with the correct tax figure in these circumstances and it is advising those affected to contact its CGT Helpline to request a paper return.
‘HMRC has not provided a timeframe for fixing this issue but the fact that it is advising the completion of paper returns when there is already a processing backlog of several months suggests that the fix may not be made soon’, said the ICAEW.
And there is a second problem. ‘As the first self-assessment tax returns are filed for 2020/21 it has become apparent that HMRC systems are not allowing CGT payments already made in accordance with the 30-day obligation to be offset against income tax due for 2020/21’, said the Institute.
The result is that taxpayers have been obliged to make overpayments and reclaim the excess later.
ICAEW said it has raised the matter with HMRC and ‘discussions are ongoing’.